Asset-specific investment locks firms out of market-based price discipline

Evidence

Once firms are locked into a relation owing to investment in specific assets, such policies no longer apply. It is then impossible to refer to the market to ensure competitive pricing. — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2576

Categorization

• XREF: Classic Williamson hold-up problem — and a direct parallel to how blindness locks the characters of Saramago’s novel into relations they cannot exit, making trust the only recourse. — connects to: Regulated investors’ restricted choices can make high-grade bond financing a super-premium strategy — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 191